Understanding the inherent limitations of crypto finance in the Islamic finance context

Abstract

The Islamic finance industry dates back to the early 1970s, which makes it relatively young compared to its conventional counterpart. However, the rate of growth in terms of its assets and markets' reach demonstrates a noticeable success story. On the one hand, it is estimated that the industry is currently worth $2.2 trillion1 with an expected continuous growth rate in 2022-2023 of about 10 per cent.2 Although in 2020 the global financial market suffered from the double shock of the Covid pandemic and the drop in oil prices, the industry grew rapidly that year albeit at a slower rate compared to 2019.3 This expansion continued throughout the year of 2021 with the rate of growth in total assets reaching 10.5 per cent.4 On the other hand, Islamic finance products are now available in all major international financial centres outside the Islamic world. The industry offers a wide range of financial products that utilizes equity- and debt-based techniques to offer financial alternatives that comply with the teachings of Islam. A prime example of its international appeal is the UK Government sovereign Sukuk al-ijara, worth £200 million, issued in 2014 and matured on 22nd July 2019. Given the success of the first issue, the UK government issued a second sovereignty Sukuk al-ijara on 25 March 2021 worth £500 million with 5 years maturity.